The author of the article, who is based at Nordea in Denmark, argues that the electricity grid is where the AI boom, the energy transition, and the reshoring of industry physically collide. Addressing that bottleneck is likely to be an enabler of growth. Recent geopolitical turmoil adds to the calculation.

The following article is from Henning Padberg (pictured below), co-portfolio manager of Nordea’s Global Climate and Environment strategy. He addresses what he sees as the urgent need for countries to cut their reliance on fossil fuels, citing the interruptions to supply caused by the Gulf conflict, among other factors, as a major reason for countries to act. 

The editors are pleased to share these views with readers. The standard editorial disclaimers apply to views of guest writers. To comment, email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

Henning Padberg

Recent events have once again highlighted a structural vulnerability the global economy has yet to fully resolve. When the Strait of Hormuz closed and the price of crude surged, governments reached for the usual responses: strategic reserve releases, rerouted pipelines, and emergency diplomacy.

The uncomfortable truth is that no reliable hedge exists against fossil fuel dependence concentrated in politically volatile regions. Supply can be diversified, but logistics or diplomacy alone cannot fully manage the underlying exposure.

The only answer, which has rarely felt more relevant, is to use less energy in the first place. For investors, this is one of the most structurally compelling opportunities available today.

The energy race as AI accelerates
Resource efficiency is not simply a theme within our Global Climate and Environment strategy, it is the dominant conviction, accounting for approximately 70 per cent of the total allocation. That reflects a long-held belief that the most economically and environmentally compelling opportunities in the green transition are not confined to generating new clean energy, important as that is, but lie in dramatically improving the efficiency of the energy systems, buildings, industrial processes, and digital infrastructure we already have.

Within resource efficiency, two structural themes have emerged with particular force this year. The first is the energy efficiency imperative at the heart of AI. The AI race, which began as a competition for raw computing power, has become an energy race. For the world’s largest technology companies, energy efficiency has moved from an environmental aspiration to a board-level operational priority.

Data center electricity demand is projected to roughly double from approximately 485 TWh in 2025 to nearly 950 TWh by 2030, a scale of consumption that already rivals Germany’s annual electricity use. This demonstrates the importance of efficiency solutions for cooling, which alone accounts for between 30 and 40 per cent of a data center’s energy consumption. A leading North American and European provider of climate control solutions, Trane’s advanced HVAC systems reduce energy consumption and are already deployed by major tech clients. The company has also committed to reducing its customers’ carbon footprint by 1 Gt of CO2 by 2030.

Elsewhere, application-specific chip architectures, advanced networking infrastructure, semiconductor manufacturing equipment, and energy management platforms are all part of this story.

Need to modernize the strained grid
The second engine is the modernization and expansion of the electricity grid itself. AI-driven data centre growth, electrification of transport and heating, and reshoring of industrial capacity are placing enormous strain on ageing grid infrastructure.

Global grid investment, which stood at around $300 billion annually in 2020, has already risen sharply and is forecast to total nearly $6 trillion globally between 2026 and 2035, with the US alone absorbing roughly $1 trillion of that capital. Capacity auction clearing prices in the largest US grid have surged to record highs, jumping nearly tenfold in two years.

The companies enabling this physical buildout and modernization sit at the intersection of several major structural growth themes. For example, these are engineering contractors laying transmission lines and integrating renewable connections, cable and equipment manufacturers supplying high-voltage systems in acute global short supply, and regulated utilities deploying capital on both sides of the Atlantic.

The grid is where the AI boom, the energy transition, and the reshoring of industry physically collide. Addressing that bottleneck is likely to be an enabler of growth. For example, French energy management and industrial automation leader Schneider Electric has enabled the avoidance of over 860 million tonnes of CO2 [emission] cumulatively since 2018 through its EcoStruxure platform. This open IoT (Internet if Things) architecture delivers 10-30 per cent energy savings in buildings and up to 25 per cent in industrial operations. It is a compelling example of what it looks like to build an entire business model around helping the world use energy more intelligently.

About the author

Henning Padberg, who is based in Copenhagen, is a portfolio manager at Nordea. He is co-portfolio manager of Nordea’s Global Climate and Environment strategy. He has worked at the firm since 2008. Earlier, Padberg interned at the asset management and institutional clients’ businesses of JP Morgan. He was educated at the University of Münster, attaining a Master of Business degree.